When you purchase a vehicle, you have a couple of options. You can purchase the car with cash, but with the current state of the economy, many buyers are unable to do this. You can also finance your vehicle. You can obtain financing through the dealership or the financial institution that you do all of your personal banking with. Before you choose who to procure a loan from, you should know all of the pros and cons for each type of financing. This will help you make a wise choice for both your pocketbook and your credit score.
Dealer Financing
You can get some good deals when you obtain financing through the dealership, but you have to be very careful. Dealerships make a commission off of loans that they sell to their customers, so don't be pressured into a loan that may not be the best option for you. First, determine who the lender is; ensure that the lender has a long history of lending money and a great reputation in the industry. You don't want to take a loan from some fly-by-night lender only to have problems later on down the road. Next, check the interest rate that you are being offered. Sometimes you can get great financing rates, especially when dealers are trying to clear out their end-of-model-year inventory. However, many lenders only work with buyers who have stellar credit. If you have less-than-perfect credit, they may charge you an exorbitant interest rate, so you are spending much more than you would if you would obtain the loan elsewhere. You should also check out some other aspects of the loan. What fees will you be charged when you accept the loan? You might be charged some fairly high loan origination fees, or you might be assessed a penalty if you pay the loan off early.
Bank or Credit Union Financing
There are several benefits of obtaining a loan from your bank or credit union. First is convenience. You can apply for a loan before you go shopping so you will have a pre-approval in hand. This will let you know how much you have to spend, and will save you from embarrassing moments at the dealership if you are turned down for financing, or approved for less than you were hoping to receive. Your bank or credit union may also be able to negotiate a lower interest rate for you, which will translate to lower payments or a shorter loan term, so you ultimately will pay less for the car. If you have other banking products through your chosen bank or credit union, this can also help lower your interest rate. In addition, when you use your bank or credit union for auto financing, you can add your loan to your online banking account, and easily make your payment each month when you log into your account. This is fairly hassle-free and lets you enjoy your car without stress.
No matter which direction you decide to go in, you should always research your options thoroughly. Don't let anyone pressure you into making a snap decision in fear of the car being sold to another buyer or the deal being taken off the table. The best place to obtain a loan is nearly always your bank or credit union. If you are looking to purchase a new or pre-owned vehicle, give us a call today. We will do our best to help you find a financing option that meets your needs and your budget, so you can drive away in a new car today.
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